Paying taxes is regarded as an unpleasant process by most people in New York City. However, paying taxes is mandated under the law and failure to comply with these laws can result in steep fines or even jail time. The Balance offers the following information on tax evasion and the consequences of not complying with the IRS.
While many people conflate the two terms, tax evasion is not the same as tax avoidance. In fact, tax avoidance is the completely legal act of lessening the amount of taxes you owe using legal methods. For instance, if you utilize deductions that help lower your overall tax burden, this is considered tax avoidance and is considered wholly legal.
Conversely, tax evasion involves steps taken to not pay taxes. This can entail many different practices, such as reporting fewer taxes than actually owed by claiming a lower income. People can also evade taxes by underpaying or lying to the IRS about expenses, which can be used to claim fraudulent deductions. Businesses can also engage in tax evasions, particularly when it comes to paying staff. For instance, a business may take out taxes from staff pay but fail to remit them to the IRS.
Your best defense against being charged with tax evasion is to know the law under which you’re operating. Never file a deduction you’re unsure of, and make sure you’re deducting the appropriate amount of money for your specific situation. Also, consider getting help with your taxes, especially if you’re a business owner. Even oversights that happen because of ignorance can still stand you in legal trouble, so it’s up to you to prevent this from happening.